Proposal to halve staff payouts in return for scrapping MPF offset

A first attempt of the new government to reach an agreement regarding the MPF offset mechanism has had little success. On Monday, members of Hong Kong’s business chambers said a proposal that would allow employers to almost halve long-service and severance payouts in return for scrapping the current offset mechanism did not go far enough.

An initiative by Secretary of Labour and Welfare Dr Law Chi Kwong, the proposal suggested capping the maximum payout to HK$200,000, nearly half the current HK$390,000. While the chambers agreed it is a step in the right direction, they said it’s not enough to compensate for abolishing the offsetting mechanism, the South China Morning Post reports.

While employers would like to see the cap as low as possible, labour representatives argue any reduction will hurt workers.

The mechanism currently allows employers to use the money they put into employees’ retirement funds to offset severance and long-service payments. Earlier this year, Hong Kong’s then-chief executive Leung Chung Ying announced plans to scrap the mechanism, leading to protests from the business community.

In May, five business groups, proposed an alternative plan that would increase the mandatory MPF contributions of employers from 5% to 6%. In return, the offset mechanism would remain intact.